SUBORDINATION AGREEMENT
                              -----------------------

          THIS SUBORDINATION AGREEMENT, dated as of December 20, 1996, is by and
between SLOUGH PARKS INCORPORATED, a Delaware corporation ("Subordinating
Party"), and COLORADO NATIONAL BANK, a national banking association ("CNB").

                                      RECITALS

          A.   CNB and Tipperary Corporation ("Borrower") have entered into a
Revolving Credit and Term Loan Agreement dated as of March 30, 1992, as amended
(the "Loan Agreement"), pursuant to which CNB has made and may in the future
make advances (the "Loan") to Borrower.

          B.   Subordinating Party wishes to extend credit to Borrower for the
purpose of permitting Borrower to acquire an additional five-percent interest in
the Comet Ridge project located in Queensland, Australia (the "Project"), with
respect to which Borrower will be liable for repayment, as evidenced by a
Promissory Note of even date herewith made by Borrower, payable to the order of
Subordinating Party (the "Subordinated Note"), together with interest thereon
and other amounts due in connection therewith, and Borrower may now or hereafter
have other liabilities and obligations to Subordinating Party.  All of the
obligations of Borrower to Subordinating Party described in the foregoing
sentence are herein called the "Subordinated Obligations."  As security for the
Subordinated Note, Borrower is delivering to Subordinating Party a pledge of and
a security interest in a ten-percent interest (the "Pledged Interest") in the
Project.

          C.   Pursuant to the terms of the Loan Agreement, and as a condition
precedent to the making of any advances thereunder, CNB has required that
Borrower obtain the subordination of the rights of Subordinating Party with
respect to the Subordinated Obligations to the rights of CNB under the Loan
Agreement and related documents.

                                     AGREEMENT

          IN CONSIDERATION of the sum of ten dollars ($10.00) in hand paid, and
in order to enable Borrower to receive advances from CNB, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Subordinating Party and CNB, the parties hereby agree as
follows:

          1.   SUBORDINATION BY SUBORDINATING PARTY.  (a) Except as otherwise
provided in Section 1(b) below, Subordinating Party will not demand, sue for,
take or receive from Borrower, by direct payment, setoff or any other manner,
the whole or any part of any amount now or hereafter payable to Subordinating
Party under or in connection with the Subordinated Obligations, including
without limitation any scheduled principal or interest payment, unless and until
all indebtedness, obligations (whether direct or contingent) and liabilities
owed by Borrower to CNB, whether now existing or hereafter arising, and whether
arising under the Loan Agreement, any past or future amendment, restatement,
extension, renewal or other variation of the Loan Agreement or otherwise (all
such indebtedness, obligations and liabilities of Borrower to CNB, collectively,
being hereinafter referred to as the "Obligations"), shall have been finally and
irrevocably paid and discharged in full.

               (b)  Notwithstanding the provisions of Section 1(a) above,
Subordinating Party shall have the right, to the extent and only to the extent
that obligations are still owed under the Subordinated Note, to receive payments
and to retain such payments for application to the repayment of the Subordinated
Note under the following circumstances: (1) prior to notice from CNB to
Subordinating Party that a Default or Event of Default has occurred under the
Loan Agreement, Subordinating Party shall have the right to receive from
Borrower the loan origination fee described in the Subordinated Note and
regularly scheduled payments of interest as Borrower is presently contractually
obligated to pay under the terms of the Subordinated Note, to the extent that
such interest payments are then due and payable; (2) Subordinating Party shall
have the right to receive the proceeds of any foreclosure or sale of, any
distributions attributable to or any other realization upon the Pledged
Interest; and (3) Subordinating Party shall have the right to receive the
proceeds of any project financing hereafter obtained by Borrower with respect to
the Project.

          2.   MODIFICATIONS OF SUBORDINATED OBLIGATIONS.  Subordinating Party
represents and warrants to CNB that it has furnished to CNB a true and complete
copy of the Subordinated Note.  Subordinating Party covenants and agrees not to
modify or amend, or to permit modification or amendment of, any of the documents
evidencing the Subordinated Obligations without the prior written consent of
CNB.

          3.   SOLE HOLDER.  Subordinating Party warrants and represents that
Subordinating Party is, and at all times prior to the termination of this
Subordination Agreement will continue to be, the sole legal and beneficial owner
and holder of the Subordinated Obligations and that Subordinating Party has not
previously assigned, and will not hereafter (prior to the termination of this
Subordination Agreement) assign, any interest in the Subordinated Obligations
without the prior written consent of CNB, which consent shall not be
unreasonably withheld if the assignee agrees in writing to receive such
assignment subject to the provisions of this Subordination Agreement.

          4.   COLLATERAL.  Until the Obligations have been finally and
irrevocably paid and discharged in full, except with the prior written consent
of CNB, Subordinating Party will not request, accept or receive any collateral
security for any of the Subordinated Obligations; provided that Subordinating
Party shall have the right to receive a pledge of and a security interest in the
Pledged Interest.

          5.   LIQUIDATION.  In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Borrower, or the proceeds
thereof, to the creditors of Borrower or readjustment of the obligations and
indebtedness of Borrower, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any part of the
Subordinated Obligations, or the application of the assets of Borrower to the
payment or liquidation thereof, or upon the dissolution or other winding up of
Borrower's business, or upon the sale of all or substantially all of Borrower's
assets, then, and in any such event: (a) CNB shall be entitled to receive
payment and discharge in full of any and all of the Obligations prior to the
payment of all or any part of the Subordinated Obligations, except that payments
may be made on the Subordinated Note to the extent such payments arise out of
the Pledged Interest or the proceeds thereof, and (b) any payment or
distribution of any kind or character, whether in cash, securities or other
property, which shall be payable or deliverable upon or with respect to any or
all of the Subordinated Obligations (other than payments or proceeds arising out
of the Pledged Interest) shall be paid or delivered directly to CNB for
application on any of the Obligations, due or not due, until such Obligations
shall have first been finally and irrevocably paid and discharged in full. 
Subordinating Party shall not, without the prior written consent of CNB, file or
join in the filing of an involuntary petition against Borrower under the
Bankruptcy Code, or any other petition, motion or complaint to declare Borrower
insolvent or unable to pay its debts as they become due, until all of the
Obligations shall have been finally and irrevocably paid and discharged in full.

          6.   RECEIPT.  Should any payment, distribution, security or
instrument, or any of the proceeds thereof, be received by Subordinating Party
upon or with respect to the Subordinated Obligations prior to the time when the
Obligations have been finally and irrevocably paid and discharged in full,
except to the extent that such receipt by Subordinating Party is otherwise
permitted by the terms of this Subordination Agreement, Subordinating Party
shall receive and hold the same in trust, as trustee, for the benefit of CNB and
shall forthwith deliver the same to CNB in precisely the form received (except
for the endorsement or assignment of Subordinating Party, where necessary), for
application on any of the Obligations, due or not due, and, until so delivered,
the same shall be held in trust by Subordinating Party as the property of CNB. 
If Subordinating Party fails to make any such endorsement or assignment to CNB,
CNB is hereby irrevocably authorized to make the same.

          7.   TERM.  This Subordination Agreement shall be effective until the
Obligations shall have been finally and irrevocably paid and discharged in full,
at which time it will terminate and be of no further force or effect.

          8.   MODIFICATIONS OF THE OBLIGATIONS.  CNB, at any time and from time
to time, may enter into such agreement or agreements with Borrower or any other
party as CNB may deem proper altering the terms of any or all of the
Obligations, releasing any one or more of obligors liable therefor, or affecting
the security or the indebtedness underlying any or all of the Obligations, and
may exchange, sell, release, surrender, or otherwise deal with any such
underlying indebtedness or security, without in any way thereby impairing or
affecting this Subordination Agreement.

          9.   WAIVERS BY SUBORDINATING PARTY.  All of the Obligations shall be
deemed to have been made or incurred in reliance upon this Subordination
Agreement.  Subordinating Party expressly waives all notices of the acceptance
by CNB of the subordination and other provisions of this Subordination Agreement
and all other notices not specifically required pursuant to the terms of this
Subordination Agreement whatsoever, and Subordinating Party expressly waives
reliance by CNB upon the subordination and other agreements as herein provided. 
Subordinating Party agrees that CNB has made no warranties or representations
with respect to the due execution, legality, validity, completeness or
enforceability of the Loan Agreement or the collectability of the Obligations,
that CNB shall be entitled to manage and supervise its loans to Borrower in
accordance with the Loan Agreement (as the same may hereafter be modified),
applicable law and its usual practices, modified from time to time as CNB deems
appropriate under the circumstances, without regard to the existence of any
rights that Subordinating Party may now or hereafter have in or to any of the
assets of Borrower.  CNB shall have no liability to Subordinating Party for, and
Subordinating Party waives, any claim which Subordinating Party may now or
hereafter have against CNB, arising out of: (a) any and all actions which CNB,
in good faith, takes or omits to take (including, without limitation, actions
with respect to the creating, perfection or continuation of liens or security
interests in any collateral granted by Borrower to CNB pursuant to or in
connection with the Loan Agreement or as security for the Obligations (the "Bank
Collateral"), actions with respect to a demand for payment under the Loan
Agreement, actions with respect to the foreclosure upon, sale, release or
depreciation of, or failure to realize upon, any of the Bank Collateral and any
actions with respect to the collection of any claim for all or any part of the
Obligations from any account debtor, guarantor or any other party) with respect
to the Loan Agreement or the collection of the Obligations or the valuation,
use, protection or release of the Bank Collateral and/or other security for the
Obligations, (b) CNB's election, in any proceeding instituted under Chapter 11
of Title 11 of the United States Code (11 U.S.C. Section 101, et seq.) (The
"Bankruptcy Code"), of the application of Section 1111(b)(2) of the Bankruptcy
Code, and/or (c) any borrowing or grant of a security interest under Section 364
of the Bankruptcy Code to Borrower, as debtor in possession.

          10.  INFORMATION.  Subordinating Party hereby assumes responsibility
for keeping itself informed of the financial condition of Borrower and of all
other circumstances bearing upon the risk of nonpayment of the Obligations
and/or the Subordinated Obligations that diligent inquiry would reveal, and
Subordinating Party hereby agrees that CNB shall have no duty to advise
Subordinating Party of information known to CNB regarding such condition or any
such circumstances.  Subordinating Party agrees to send promptly to CNB a copy
of any default notice sent by Subordinating Party to Borrower in connection with
any of the Subordinated Obligations.

          11.  WAIVER AND AMENDMENT.  No failure or delay by CNB in exercising
any right, power or remedy which it may have hereunder shall operate as a waiver
thereof or of any other right, power or remedy, nor shall any single or partial
exercise by CNB of any such right, power or remedy preclude any other or further
exercise thereof or of any other right, power or remedy.  No waiver of any
provision hereof and no consent to any departure therefrom shall ever be
effective unless it is in writing and signed by the waiving or consenting party,
and then such waiver or consent shall be effective only in the specific
instances and for the purposes for which given and to the extent specified in
such writing.  No modification or amendment of or supplement to this
Subordinating Agreement shall be valid or effective unless the same is in
writing and signed by the party against whom it is sought to be enforced.

          12.  NOTICES.  All notices, requests, demands or other communications
provided for herein or given or made between the parties hereto in connection
herewith shall be in writing and shall be addressed to the party to be notified
at its address set forth below or at such other address as such party may from
time to time designate by notice to the other parties hereto.  All notices
(except notices of change of address) shall be effective at the following times
based upon the method of delivery selected: (a) one day after deposit in the
United States mail, postage prepaid, registered or certified mail, return
receipt requested; (b) upon delivery, if delivered in person either directly to
the party to be notified or to the address of such party designated herein; or
(c) upon delivery, if delivered by commercial express service or courier to the
address of such party designated herein.  Notices of change of address shall be
effective 10 days after the effective time otherwise applicable thereto:

                    IF TO CNB:

                    950 Seventeenth Street
                    Denver, Colorado 80202
                    Attention: Paul Jelaco
                    Telephone: (303) 585-4983
                    Fax: (303) 585-4362

                    IF TO SUBORDINATING PARTY:

                    33 West Monroe Street
                    Chicago, Illinois 60603
                    Attention: Deborah L. Bean
                    Telephone: (312) 558-9100
                    Fax: (312) 558-9041

          13.  GOVERNING LAW.  This Subordination Agreement shall be deemed a
contract made under the laws of the State of Colorado and shall be construed and
enforced in accordance with and governed by the laws of the State of Colorado.

          14.  SEVERABILITY.  If any term or provision of this Subordination
Agreement shall be determined to be illegal or unenforceable, all other terms
and provisions hereof shall nevertheless remain effective and shall be enforced
to the fullest extent permitted by applicable law.

          15.  COUNTERPARTS.  This Subordination Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same agreement.

          IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.

                              SLOUGH PARKS INCORPORATED

                              By:  /s/ Deborah L. Bean
                                   ---------------------------------------------
                                   Deborah L. Bean,
                                   Vice President and
                                   Chief Financial Officer

                              COLORADO NATIONAL BANK

                              By:  /s/ Charles S. Searle
                                   ---------------------------------------------
                                   Charles S. Searle,
                                   Senior Vice President


                           ACCEPTANCE AND ACKNOWLEDGMENT
                           -----------------------------

          The undersigned, TIPPERARY CORPORATION, hereby: (1) accepts and
acknowledges receipt of a copy of the foregoing Subordination Agreement as of
December 20, 1996, (2) consents to the terms thereof, and (3) agrees that it
will not pay any of the Subordinated Obligations (as defined in the foregoing
Subordination Agreement) except as permitted by the foregoing Subordination
Agreement.

                              TIPPERARY CORPORATION

                              By:  /s/ David L. Bradshaw
                                   ---------------------------------------------
                                   David L. Bradshaw,
                                   President and Chief
                                   Executive Officer